FXStreet (Delhi) – Research Team at NAB, notes that the dollar longs buildup has become more evident in recent weeks when we look at collective IMM USD net speculative positioning against G10 currencies.
Key Quotes
“This shows net USD longs recently rebuilding back towards their late 2014/early 2015 extremes. Rather, the more significant market reaction will come from the Fed’s new ‘dot point’ funds rate forecasts. Here, the FOMC will likely use the new iteration of the dot points to underscore the expected gradual nature of tightening.”
“That said, the discussion on the equilibrium real interest rate contained in the October meeting minutes and which suggests this may not be much if anything above zero, ostensibly implies a Fed Funds rate of 1.5-2.0% assuming that inflation does move up closer to the Fed’s target of 2% over the course of next year.”
“Of course, the Fed can and doubtless will argue that a period of negative real interest rates will remain appropriate and in which respect we’d note that market pricing following the October minutes discounts less than 75bps of tightening between now and the end of 2016.”
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